Since mid-2020, financial technology companies (“fintechs”) have hardly been out of the news. A lot is said about innovation in Digital Finance, but most surprising is the intensity of the public debate around the side-effects of fintechs, including the latest RobinHood / Gamestop / Wall Street investment saga as well as the flurry of mega IPOs and deals in the sector.
Obviously, the increased interest is a direct consequence of the rise in digital finance. Digital payments rose by 72 percent in just a few months following the start of the pandemic and neobanks all over the world have added millions of clients.
However, there are pre-existing trends that have driven the high level of investor interest in fintechs and the huge amount of capital they have poured into this sector. Finance and Financial services affect all of us, across all industries, across all demographics and all geographies.
But what we have seen so far is only the tip of the iceberg in what could potentially be the digital revolution of this decade.
Neobanks have so far merely “copied” the traditional bank model. Generally,they have added a good amount of automation on top of off-the-shelf core banking solutions, as well as a slick UX and a smoother interface for traditional services including share trading, FX, savings and payments functionalities.
Yet, it is easy to see that this is not enough of a differentiation to convince retail clients to switch wholly to digital banking. Also, these new platforms are mostly suited for “plain vanilla” retail products such as personal accounts and simple transactional SMEs.
On the other hand, many fintechs have focused on a specific financial service or solution: investing, borrowing, delayed payment, international remittances, etc. and although there is a growing number of aggregators, most are still built as standalone solutions to compete or replace traditional services and incumbents.
“Today’s technologies can help to restore trust in the system, by ensuring a much higher consistency and integrity in data - key pillars of transparency”
This approach is only a steppingstone to where our industry is going – platform banking. ARIE Finance has therefore developed an approach and technology platform that goes way beyond most neobanks to create a whole new ecosystem.
To succeed on the evolutionary journey that the financial services industry is taking, there are three clear principles which need to be followed. Digital Finance:
• Needs to put the client back in the driver’s seat.
• Must simplify flows and processes.
• Should restore trust and transparency in a system where suspicion and complexity are the rule.
Technology is key to achieving these goals and luckily, it is increasingly available.
Putting the client in the drivers’ seat is central to the global trend of customisation and hyperpersonalisation. It assumes that the client is knowledgeable,responsible and prefers an “A La carte” solution rather than being forced to choose from a limited menu. By understanding the choices that clients make along with data analysis we will have the ability to progressively tailor the most suitable offering for each client according to their needs, interests, financial constraints and objectives.
In a second stage,the use of predictive analytics, behavioural science and artificial intelligence will allow us to move further into the field of active recommendations and even anticipate the needs of the client.
Finally, in order to really personalize the customer journey and allow them to build their very own financial services experience, fin-techs need to stop thinking in terms of traditional competition and more in terms of building interactive ecosystems, including both platforms and marketplaces. Instead, we will need to create a universe of services that is personal, highly relevant and genuinely adds value. This can only be achieved by establishing a digital environment that allows the client to choose their preferred financial services providers whilst also enabling seamless communications between them.
However, automation is only a first step in simplifying the processes: It is not enough on its own. Interoperability between a huge number of different systems is necessary. But we are also well aware that in the near term it will be almost impossible to harmonise all the different regulatory requirements globally as well as the various technologies. Therefore, the most immediate solution is to support the development of products that talk to each other through the use of open APIs as a standard feature.
“Open banking” or “API Banking” is often talked about in the same breath, and it is safe to say that most players are “API ready”. However, this is quite different from being ready for “open banking” and most of these “APIs” are still proprietary.
One of the early brands to adopt this model has been Transfer wise whose success is due to having built and offered a set of open APIs to whoever wishes to connect, allowing for a simple, cost-efficient and straightforward interaction. However, for a true digital revolution, many more services like this are needed.
But simplification is not enough at the 3rd party connectivity level. It also needs to be part of the system infrastructure and business strategy of each service provider.
Based on these beliefs,ARIE Finance is the first in the market to build its own core banking platform on the basis of a completely digital modular architecture, composed of a series of swappable and automatically scalable micro-services (using a “LegoTM - like” architecture). This approach guarantees that the underlying platform remains simple, flexible and adaptable without building layers of legacy.
Global finance and financial flows are not possible without the notion of reciprocal trust. Since 2008, the growing emphasis on transparency and compliance has in fact, had the counter-intuitive effect of generating a widespread mistrust in exchanges between incumbents and even more so towards new players.
Today’s technologies can help to restore trust in the system,by ensuring a much higher consistency and integrity in data - key pillars of transparency.
There are other solutions too. The use of blockchain as the core solution to the exchange of data is obviously an especially important part of the solution. That could be easily be supplemented by digital notarization using QR codes, segregated servers, and private clouds.
Finally, integrating standardized AI driven predictive pattern-recognition will allow for far more effective support to anti-money laundering procedures, while reducing latency in the system, cost-inefficiency, and delays for the client.
The above views are not utopian. We are already implementing many of these solutions in our native cloudbased, asset-light core banking platform, and we are working on the next generations that will include all the smart features.
Tomorrow’s global financial landscape will be driven by a few global platforms organized around themes and technologies where the traditional and new service providers come together in a well organized synergetic ecosystem. It is not only exciting from a technology point of view, but a truly progressive journey on the human side, and we are extremely happy to be at the forefront of it.